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Overview

Guinea-Bissau, one of the world’s poorest and most fragile countries, has a population of about 1.8 million. Guinea-Bissau’s Atlantic Ocean coast is composed of an archipelago, the Bijagos, of more than 100 islands. It borders Senegal to the north and Guinea to the south and east, and despite its size, is host to a large variety of ethnic groups, languages, and religions.

Political Context

Guinea-Bissau has a history of political and institutional fragility dating back to its independence from Portugal in 1974. The country is one of the most coup-prone and politically unstable countries in the world. Since independence, four successful coups have been recorded in Guinea-Bissau, with another 16 coups attempted, plotted, or alleged. In addition to military coups, frequent changes in government are another manifestation of the country’s political instability.

Outcomes of parliamentary elections on March 10 indicates a new configuration of the political picture, with no absolute majority. The results gave the African Independence Party of Guinea and Cape Verde (PAIGC) 47 ministers of parliament (MPs), followed by the Movement for a Democratic Alternative (MADEM-G15) with 27 MPs, Party for Social Renewal (PRS) has 21 MPs, APU has 5, and the United People’s Alliance (UM) and the New Democracy Party (PND) each have one parliamentarian. All political parties that disputed the 102 seats in Parliament accepted the verdict of the polls and expressed their willingness to work for the stabilization of Guinea-Bissau for the next four years.

Presidential Elections, according to the Constitution, are expected to take place by the end of 2019.

Last Updated: Apr 09, 2019

Economic Overview

Guinea-Bissau’s economy has slowed down in 2018. Economic growth is estimated to have declined to 3.8% in 2018, from 5.9% in 2017, due to lower cashew production caused by adverse weather conditions. Cashew exports declined by about 25%. Lower global cashew prices have also contributed to the lower cashew income. Fluctuations in international cashew prices continue to have significant growth and fiscal implications given the country’s high export concentration in cashew. Despite gradually rising fuel prices, inflation is estimated at 1.2% in 2018, reflecting the slowdown in domestic demand.

The fiscal situation remained weak due to low domestic revenue mobilization. The fiscal deficit deteriorated from 1.7% of GDP in 2017 to an estimated 5.1% in 2018 (on commitment basis), driven by weak tax revenue collection and increased capital spending. Tax revenue declined from 10.3% of GDP in 2017 to 9% in 2018, due to lower cashew income and a decrease in imports. Total government expenditure increased from 19.7% of GDP in 2017 to 21.8%, largely due to foreign-financed capital spending. Government expenditures on non-regularized expenditures (DNTs) resurfaced for the first time since end-2016. The fiscal deficit was financed mainly by treasury securities issuance on the regional market and foreign-currency project loans, mostly concessional.

Development Challenges

Growth declined to 3.8% in 2018, mainly reflecting a substantial decrease in cashew production caused by adverse weather conditions and is expected to gradually rebound to 4.8% by 2020. This projection assumes an increase in domestic demand, underpinned by improvements in electricity supply, and increased investment in road and other key infrastructure. It is also assumed that the political stability would be maintained. Inflation is expected to rise slightly in view of higher global oil prices and rising domestic demand, but it should remain below 3% over the medium-term.

Given Guinea-Bissau’s history of fragility and upcoming elections, the outlook is uncertain, with pronounced risks to growth and poverty reduction. The reliance on cashew nuts for economic livelihood exposes two-thirds of the population to terms-of-trade shocks. Further diversification, either through moving up the value chain—with agricultural technology and market support systems—or through capitalizing on other green shoots in the agriculture sector will be key to bolstering the resilience of the economy. The resurgence of political tensions in the run-up to the 2018 legislative and 2019 presidential elections may cause fiscal slippages, reduce commitment to structural reforms, and discourage private investment. Risks associated with banking instability (high NPLs, undercapitalization, and unresolved bank bailout controversy) constitute a threat to macro-financial stability.

A steep increase in oil prices would also put pressure on the external current account balance and leave less resources for pro-poor government spending. Addressing high inequality in the country also requires efforts to improve service delivery and enhance access to basic services. However, accelerating or even sustaining the pace of poverty reduction will be difficult if the political situation remains unresolved, and if the major development challenges that constrain growth, inclusiveness, and sustainability are not addressed.

Last Updated: Apr 09, 2019

Bank portfolio in Guinea-Bissau

The active portfolio for Guinea-Bissau comprises seven national projects ($141.28 million), and four regional operations ($188.60 million) for a total commitment amount of $329.88 million all funded by the International Development Association. Guinea-Bissau’s national allocation under IDA18 is $87.50 million. An additional $4.30 million is funded by the Global Partnership Education (GPE) to support the education project.

The Guinea-Bissau Quality of Education for All Project was approved on July 31, 2018 the Rural Transport Project is still under preparation with a Board approval scheduled for May 31, 2019.

The Guinea-Bissau Country Partnership Framework (FY18-21) proposes a selective and flexible World Bank Group program. The two CPF focus areas are: (i) Increased access to quality basic services especially outside of the capital city of Bissau and in the poorest areas of the country and (ii) Expanded economic opportunities and enhanced resilience with gender and governance as cross-cutting themes.

A Performance and Learning Review (PLR) is being currently launched which will allow an update of the World Bank Country Partnership Strategy (CPS) approved in July 2017. A Risk and Resilience Assessment (RRA) is also being conducted jointly with the African Development Bank (AfDB) to update the 2015 fragility assessment that informed the SCD. The RRA will also contribute to the PLR to be finalized in FY20.

Last Updated: Apr 09, 2019

Guinea-Bissau’s main development partners are the European Union (EU), the Economic Community of West African States (ECOWAS), the West Africa Economic Monetary Union (WAEMU), the West Africa Development Bank (BOAD), the African Development Bank (AfDB), United Nations agencies, the World Bank Group and the International Monetary Fund.